INTERM.ACCT.:REPORTING...-CENGAGENOWV2
3rd Edition
ISBN: 9781337909358
Author: WAHLEN
Publisher: CENGAGE L
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Textbook Question
Chapter 6, Problem 8E
Estimation versus Direct Write-Off of
Required:
- 1. Prepare the
journal entries necessary to record the preceding information if (a) had debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur. - 2. Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred? Why?
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Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected.
Required:
1.
Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur.
2.
Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred? Why?
CHART OF ACCOUNTS
Blunt Company
General Ledger
ASSETS
111
Cash
121
Accounts Receivable
122
Allowance for Doubtful Accounts
141
Inventory
152
Prepaid Insurance
181
Equipment
198
Accumulated Depreciation
LIABILITIES
211
Accounts Payable
231
Salaries Payable
250
Unearned Revenue
261
Income Taxes Payable
EQUITY…
Blunt Company makes credit sales of $21,000 during the month of February 2019. During 2019, collections are received on February sales of $20,400, accounts representing $600 of these sales are written off as uncollectible, and a $100 account previously written off is collected.
Required:
1.
Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur.
2.
Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred? Why?
1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.
1b.…
Instructions
General Journal
1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense on December 31.
The following information is extracted from Shelton Corporation's accounting records at the beginning of 2019:
Chart of Accounts
Accounts Receivable
$71,000
General Journal Instructions
CHART OF ACCOUNTS
Allowance for Doubtful Accounts
1,200
(credit)
Shelton Corporation
PAGE 1
During 2019, sales on credit amounted to $568,000, $553,600 was collected on outstanding receivables and $2,600 of receivables were written
General Ledger
off as uncollectible. On December 31, 2019, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.
GENERAL JOURNAL
ASSETS
REVENUE
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
Required:
111 Cash
411 Sales Revenue
1.
1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense for 2019.
121 Accounts Receivable
2
2. Prepare the Accounts Receivable section of Shelton's…
Chapter 6 Solutions
INTERM.ACCT.:REPORTING...-CENGAGENOWV2
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- Estimating Bad Debts from Receivables Balances The following information is extracted from Shelton Corporations accounting records at the beginning of 2019: During 2019, sales on credit amounted to 575,000, 557,400 was collected on outstanding receivables and 2,600 of receivables were written off as uncollectible. On December 31, 2019, Shell on estimastes its bad debts to be 4% of the outstanding gross accounts receivable balance. Required: 1. Prepare the journal entry necessary to record Sheltons estimate of bad debt expense for 2019. 2. Prepare the Accounts Receivable section of Shelton's December 31, 2019, balance sheet. 3. Compute Shelton's receivables turnover. (Round to one decimal place.) 4. It Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?arrow_forwardMcKinney Co. estimates its uncollectible accounts as a percentage of credit sales. McKinney made credit sales of 1,500,000 in 2019. McKinney estimates 2.5% of its sales will be uncollectible. Prepare the journal entry to record bad debt expense for McKinney at the end of 2019.arrow_forwardEstimating Bad Debts Keegan Corporations accounting records disclosed the following information for 2019: Keegan wishes to examine the effect of various alternative had debt estimation policies. Required: 1. Prepare the adjusting entry that would be required under each of the following methods: a. Bad debts are estimated at 3% of net credit sales. b. Bad debts are estimated at 7.5% of gross accounts receivable. c. An aging of accounts receivable indicates that half of the outstanding accounts will incur a 3% loss, a quarter will incur a 6% loss, the remaining quarter will incur a 20% loss. 2. Next Level Discuss the difference between the income statement and balance sheet approaches to estimating bad debts.arrow_forward
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Accounts Receivable and Accounts Payable; Author: The Finance Storyteller;https://www.youtube.com/watch?v=x_aUWbQa878;License: Standard Youtube License